Nigerian agritech startup Releaf raises $ 4.2 million to scale its food processing technology – TechCrunch


The distance between their farms and the closest processor is key for small farmers who need to process their crops. And while Nigeria’s food processing systems bear a strong resemblance to the West with respect to large factories and huge economies of scale in high-demand cities, farmers still suffer from poor logistics networks.

With distance and logistics problems, farmers’ crops can go bad and when factories Buying them affects their price and throughput. Farmers, who witness post-harvest losses, also receive lower wages and lose the opportunity to invest in the production of their crops.

Nigerian Agriculture Startup Releaf is solving this by creating proprietary hardware and software solutions to make these farmers and food factories more efficient and profitable. Today, the company announces that it has raised $ 2.7 million in seeds and grants for this effort.

Pan-African venture capital firms Samurai Incubate Africa, Future Africa and Consonance Investment Managers led the round. Individual investors such as Stephen Pagliuca, Chairman of Bain Capital and Justin Kan of Twitch also participated..

What’s more For the seed round, the Agritech startup secured $ 1.5 million in grants from the Challenge Fund for Youth Employment (CFYE) and USAID.

Founded by Ikenna Nzewi and Uzoma ayogu, Releaf focuses on value chains in which smaller factories are established close to small farmers.. This allows them to obtain better processing yields and lower logistics costs; in the end, the farmer has more money to work with.

When the couple started the company in 2017, the idea behind Relead was not yet concrete, as the team, based in the US, had not discovered the fit between the product and the market.

First, he planned to increase productivity in Nigeria’s agricultural sector using software. Even after graduating from Y Combinator Summer Bundle That year, Releaf toyed with ideas about trade financing and a marketplace for buyers and sellers of produce..

The team would get a clearer picture of what they wanted to build when the founders returned to Nigeria. Americans of Nigerian descent toured 20 states and studied different value chains for crops and found inefficiencies that could be solved by technology.

“We take a much broader approach to what the solution would be, but Really I wanted to decide on a specific crop to work with. And we found that opportunity in the oil palm sector, ”Nzewi told TechCrunch in an interview.

The oil palm market in Nigeria is $ 3 billion with over 4 million small farmers growing farms where those crops they are planted.

These farmers drive 80% of production of oil palm. But since the industry is quite fragmented, they have many challenges to process oil palm because it is a crop that requires a lot of processing power. for extract vegetable oil from it.

Releaf

Image credits: Releaf

Farmers typically go through this process by using rocks or inappropriate hardware – Ineffective processes leading to poor quality oil palm. largely not suitable as an input for the manufacture of high quality vegetable oil.

Nzewi says the team saw an opportunity and set out to develop a technology to help farmers crack oil palm nuts. The result was Kraken, a patented, patent-pending machine.

This is how the company’s business model works. Releaf buys walnuts from farmers, then uses the Kraken to crack the walnuts and mash the kernels in vegetable oil. Releaf then sells the vegetable oil to local consumer goods processors and manufacturers, mainly in the south-south region of Nigeria.

“Nigeria has about 60% more demand for vegetable oil than it offers. And it cannot be covered for lack of supply with imports because the government banned the import of vegetable oil. Therefore, it is necessary to take these small farmers who are driving 80% of production and make them more efficient so that we can have a better balance between supply and demand for vegetable oil, ”said Nzewi about the pain point that is tackling Releaf..

But still, why does the company think it can enter a competitive Nigerian vegetable oil market with hard-to-differentiate products?

Nzewi explains that the answer lies in the quality of the products. Typically vegetable oil is driven by a free fatty acid (FFA) metric that measures the impurity of vegetable oil. The CEO states that while the industry standard is about 5% FFA, Releaf produces at 3.5%.

Despite having an advantage in production quality, Releaf products They are sold in an industry standard. Nzewi says that might not be the case in the future as the company finally looks to take advantage of the quality of its product and increase prices to improve its profit margins..

According to the company, Kraken already processes 500 tons of palm nuts. Its software connects to more than 2,000 small farmers who have supplied more than 10 million kilograms of quality palm kernels to food factories.

Regarding expansion, Nzewi noted that Releaf has more of an appetite for moving to new geographies rather than offering crops.. Their argument is that palm oil processing and cultivation style is a straightforward method due to its similarities in West Africa..

But for crop expansion, the company may need to find crops that can be planted together with oil palm and practice intercropping or work with crops such as soybeans or peanuts used in the vegetable oil industry.

Releaf

LR: Uzoma Ayogu (CTO) and Ikenna Nzewi (CEO)

Releaf will use the initial investment to develop technology and implement it among small farmers, Nzewi tells me. Then the $ 1.5 million in grants will focus on the provision of working capital financing to these farmers. He adds that Releaf has already run funding trials this year in which it has increased the incomes of small farmers three to five times.

We think there is a Really great opportunity to bring physical technology and financial services to these communities to make them more productive. And it is central to our thesis, ”said the CEO. “We believe that our smart factories can serve as an economic mainstay in these rural communities and make it easier for us to provide these communities with other services that they may find valuable such as access to working capital, payment for education, and access to insurance services. So we see food processing as the first step that consolidates us in the value chain.. “

Earlier this year, agricultural startups such as Gro Intelligence and Aerobotics raised huge sums of venture capital and showed the promise of the sector in Africa. However, venture capital has slowed in recent months and Releaf’s investment returns that focus of attention to the sector, albeit briefly.

Rena Yoneyama, Managing Partner of Samurai Incubate Africa, said Releaf’s novel approach sets it apart from other agricultural startups the venture capital firm has committed to.

We believe The company’s thesis on the decentralization of food processing will coincide strongly with the economic development landscape of Africa for decades to come.. Ikenna and Uzo are the perfect founders to revolutionize this market in Nigeria and beyond. U.S they’re excited support them as they innovate in providing agricultural processing and financial services to rural communities and farmers,“she added.

Also speaking about the investment, Iyin Aboyeji, general partner of leading co-investor Future Africa, said: “… The Releaf team is building the agri-food industry of the future from scratch, starting with palm oil for which they have developed a novel technology to add, hull and process into critical ingredients like vegetable oil and glycerin. Future Africa is delighted to support Releaf in building the future of modern agriculture. ”


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